Apple gripes about antitrust monitoring

[PatNY]

Originally Posted by Robotech_Master

Here's one antitrust law expert (I googled him, he appears to have reasonable credentials.) He seems to be arguing against the facts as stated in the case, calling the evidence weak and circumstantial.

Well, that was rambling. He certainly is a qualified lawyer, but he spends a lot of time simply re-interpreting facts to fit his opinion. In this trial, Cote is the finder of facts. The appeals court is likely to tread very lightly there.

Also, Manne says a lot of questionable things such as:

“While the court claims that the publishers’ concern with Amazon’s $9.99 pricing was its effect on physical book sales, it is extremely hard to believe that somehow $12.99 for the electronic version of a $30 (or, often, even more expensive) physical book would be significantly less damaging to physical book sales.”

Not only is that just his opinion (vs. Cote's) ... but I think it is weak. How often did people ever pay $30+ for hardcover books back then? I rarely did. Hardbacks were discounted back then. It was most likely roughly $15 or so. So, it's not a matter of 12.99 vs. $30 but rather $12.99 vs. $15 or thereabouts. Which makes it much more plausible that a rise in ebook prices would protect the sale of hardcovers. It's a plausible reason for the publishers to have agreed to agency pricing.

--Pat

[PatNY]

Originally Posted by pwalker8

Oh, I'm sure there are federal judges who haven't been overturned. The point is that since Judge Cote has been overturned (the most recent was one this past fall, which I pointed to in the previous thread about this case, some that I found with a casual search include Tyco v Walsh, Barclays v Theflyon thewall.com and Caiola v Citibank, there are others) the assumption that she won't be overturned because she wrote such a detailed judgment doesn't hold water.

I'm not so sure. I highly doubt there is a U.S. federal district judge who has been on the bench for as long as Cote who has never been overturned "a number of times."

There might be perhaps a rare case of someone who was only a federal judge for a relatively short period of time and so was never overturned. But someone with a tenure a long as Cote? I doubt it.

And I think the feeling is that because Cote's decision was so detailed, covering all the bases, she is less likely to be overturned -- not that she won't be.

--Pat

[Sil_liS]

Originally Posted by Robotech_Master

Here's one antitrust law expert (I googled him, he appears to have reasonable credentials.) He seems to be arguing against the facts as stated in the case, calling the evidence weak and circumstantial.

He isn't arguing the facts, he is just repeating that the evidence weak and circumstantial over and over while ignoring facts (i.e. he argues that the ruling will change the business model while ignoring that the agreements changed the business model first, he ignores the fact that the book prices in question are for best sellers, and not the average book, when comparing ebook prices with physical book prices he ignores the fact that physical books benefit from discounts that can leave them at a lower price than their digital counterparts). And his credentials show that he has ties with Microsoft, so he will be biased on his position in respect to antitrust laws and will not offer an impartial point of view.

Originally Posted by pwalker8

Most of the legal analysis of the case that are of interest are not anonymous comments. There are actually quite a few lawyers who have blogs. I think that it's a combination of many lawyers being naturally talkative and it's good advertisement for them.

It's perfectly ok for Apple to discuss with publishers what terms the publishers will offer other retailers, the doctrine is called a most favored nation clause. This is why a lot of anti-trust lawyers (and companies) are worried about Judge Cote's ruling. If upheld it will cause a lot of existing contracts to be called into question. I suspect that it will be one of the most likely lines of appeal for Apple.

But you based your comments not on an anonymous comment from 2009 and non-legal articles that made it sound that the judge made up her mind about the case before seeing the evidence by simply not stating that the comments were made after she viewed the evidence.

And this doctrine automatically raises antitrust concerns, it is not perfectly ok.

Commercial transactions. A contractual provision, also known as a "most-favored-customer clause," "prudent buyer clause" or "non-discrimination clause," in which the seller promises the buyer that it will not offer another buyer better terms before offering those terms or better terms to the first buyer. Because of antitrust concerns that this practice may be used in an anticompetitive manner, courts will examine these provisions closely using a rule of reason analysis. Courts will determine the enforceability of the MFN provision by balancing the pro-competitive benefits of the provision (such as cost savings for buyers that may be passed on to downstream buyers) against the anticompetitive harms (such as discouraging price cutting and potentially encouraging monopolies).

If the agreements would have been about getting bestseller prices to 8.99 (for example) it would not have been antitrust, because the lack of competition would have been balanced by the benefit to the consumers.

[Fluribus]

Originally Posted by PatNY

Not only is that just his opinion (vs. Cote's) ... but I think it is weak. How often did people ever pay $30+ for hardcover books back then? I rarely did. Hardbacks were discounted back then. It was most likely roughly $15 or so. So, it's not a matter of 12.99 vs. $30 but rather $12.99 vs. $15 or thereabouts. Which makes it much more plausible that a rise in ebook prices would protect the sale of hardcovers. It's a plausible reason for the publishers to have agreed to agency pricing.

--Pat

Unfortunately for them, the price increase certainly made a difference in my buying habits. It also put me in a surly mood.

[laughingdragons]

Originally Posted by Fluribus

Unfortunately for them, the price increase certainly made a difference in my buying habits. It also put me in a surly mood.

Ditto.....But it did get me to try different authors due to the lower prices. Plus I now use my online library more now on any book over $9.99.

I don't mind waiting a few months to read a book.

[crossi]

Originally Posted by laughingdragons

Ditto.....But it did get me to try different authors due to the lower prices. Plus I now use my online library more now on any book over $9.99.

I don't mind waiting a few months to read a book.

I also. Before the conspiracy I was mildy appreciative of the publishers though less so since they started emphasizing trade paperbacks instead of mass market. Afterwards I was actively hostile to the conspirators including Apple. I went from buying 5 to 10 books a week to almost none for the duration of the agency pricing. I would only buy the occasional book I wanted if the price was at pre-agency levels and simply read my backlog of already purchased books.

[SteveEisenberg]

Originally Posted by crossi

I went from buying 5 to 10 books a week to almost none for the duration of the agency pricing.

Agency wasn't a get rich quick scheme. My impression is that the publishers expected it would lower revenue, as it did.

The purpose was to keep Amazon from getting such a big market share that it would gain control over its book suppliers. By stopping the loss leader pricing for a while, they may have done that.

I read somewhere that Amazon has become so much bigger than big five publishing* as to make cornering the book market less attractive than previously. If so, getting their wrists slapped for non-criminal antitrust may have been worth it to the settling publishers.


______________________
* Googling, market capitalization for Amazon is over US$183 billion for Amazon, and under US$5 billion for the largest publisher by far, Penguin Random House owner Bertelsmann.

[jgaiser]

Originally Posted by SteveEisenberg

* Googling, market capitalization for Amazon is over US$183 billion for Amazon, and under US$5 billion for the largest publisher by far, Penguin Random House owner Bertelsmann.

Except Amazon is not *just* a publisher, so we're talking Apples and Oranges. And since Amazon doesn't release it's sales data, it's all guesses anyway.

[SteveEisenberg]

Originally Posted by jgaiser

Except Amazon is not *just* a publisher, so we're talking Apples and Oranges.

Right. Amazon started out as a book company, but that part of its business is less and less important to its overall success.

I'm not sure why you apparently think this contradicts my last post.

[Robotech_Master]

Originally Posted by SteveEisenberg

Agency wasn't a get rich quick scheme. My impression is that the publishers expected it would lower revenue, as it did.

The purpose was to keep Amazon from getting such a big market share that it would gain control over its book suppliers. By stopping the loss leader pricing for a while, they may have done that.

The problem is, you can't really say for sure whether agency pricing was entirely or even largely responsible for Amazon's market share decreasing. Barnes & Noble had already entered the e-book market. Say, as a thought experiment, that Apple entered the market and matched Amazon's loss-leader pricing, even though they didn't want to (which is why they conspired to force the new pricing scheme into play in the first place). Sure, they'd be losing money on those new titles, but if the loss leader strategy worked for Amazon it should work for them, too—they'd make money hand over fist from the older titles that buying the newer titles led consumers into buying.

Don't you think Amazon's market share would still have gone down? After all, e-books would have still cost the same everywhere, it's just they'd have been cheaper. I can't see anyone having a reason to buy from Apple or B&N when everyone charged $12 or $15 who wouldn't have had the same reason to buy if everyone was still just charging $10. The prices would have been the same from vendor to vendor either way, it's just that they'd have been the same low instead of the same high.

[bgalbrecht]

Originally Posted by SteveEisenberg

Agency wasn't a get rich quick scheme. My impression is that the publishers expected it would lower revenue, as it did.

The purpose was to keep Amazon from getting such a big market share that it would gain control over its book suppliers. By stopping the loss leader pricing for a while, they may have done that.

I read somewhere that Amazon has become so much bigger than big five publishing* as to make cornering the book market less attractive than previously. If so, getting their wrists slapped for non-criminal antitrust may have been worth it to the settling publishers.

My impression is that it would lower ebook revenue, but their goal was to raise ebook prices so people would be less inclined to switch from hardcover purchases to ebooks, since hardcovers pay for most if not all of the upfront costs of putting out a book. I believe Amazon's ebook business was profitable, even if they were using the NY Times best seller list as a loss leader to entice people to buy Kindles, and that the Department of Justice had already investigated them and didn't find anything actionable before the publishers and Apple teamed up.

[pwalker8]

Originally Posted by bgalbrecht

My impression is that it would lower ebook revenue, but their goal was to raise ebook prices so people would be less inclined to switch from hardcover purchases to ebooks, since hardcovers pay for most if not all of the upfront costs of putting out a book. I believe Amazon's ebook business was profitable, even if they were using the NY Times best seller list as a loss leader to entice people to buy Kindles, and that the Department of Justice had already investigated them and didn't find anything actionable before the publishers and Apple teamed up.

As I recall from the time, the issue was that the publishers thought that Amazon was setting a price point ($10 for brand new NYT best sellers) in the mind of the consumers that the publishers didn't like. I don't think that publishers really cared all that much what format people bought books at, as long as it was at the "proper" price point.

The basic price model for publishers for a long time has been hardback, followed by paper about a year later. The hard back was roughly 3 times what the paper cost. Amazon was basically breaking that price model by setting the price point of ebooks at initial release as slightly less than double the paper back price point.

Just looking at some of the pricing threads here show a certain level of accuracy to their concerns. Even ignoring the "I just want everything to be free" crowd, few here seem to think that an ebook should have the same price point as a hard back. A majority seem to think that it should be less than a paper back, even if it's released at the same time as the hard back.

[shalym]

Originally Posted by pwalker8

As I recall from the time, the issue was that the publishers thought that Amazon was setting a price point ($10 for brand new NYT best sellers) in the mind of the consumers that the publishers didn't like. I don't think that publishers really cared all that much what format people bought books at, as long as it was at the "proper" price point.

The basic price model for publishers for a long time has been hardback, followed by paper about a year later. The hard back was roughly 3 times what the paper cost. Amazon was basically breaking that price model by setting the price point of ebooks at initial release as slightly less than double the paper back price point.

Just looking at some of the pricing threads here show a certain level of accuracy to their concerns. Even ignoring the "I just want everything to be free" crowd, few here seem to think that an ebook should have the same price point as a hard back. A majority seem to think that it should be less than a paper back, even if it's released at the same time as the hard back.

Ok...Let's hear your arguments to the contrary. Why should it cost the same as the hardcover? Especially since hardcovers don't even usually cost as much as the list price of the hardcover? I don't think I've EVER paid list price for a hardcover book, even when I bought it very soon after it was released. I think the MOST I've ever paid was for the last Harry Potter book on the day of release, and even that was 10% off of the list price.

Shari

[Greg Anos]

Originally Posted by pwalker8

As I recall from the time, the issue was that the publishers thought that Amazon was setting a price point ($10 for brand new NYT best sellers) in the mind of the consumers that the publishers didn't like. I don't think that publishers really cared all that much what format people bought books at, as long as it was at the "proper" price point.

The basic price model for publishers for a long time has been hardback, followed by paper about a year later. The hard back was roughly 3 times what the paper cost. Amazon was basically breaking that price model by setting the price point of ebooks at initial release as slightly less than double the paper back price point.

Just looking at some of the pricing threads here show a certain level of accuracy to their concerns. Even ignoring the "I just want everything to be free" crowd, few here seem to think that an ebook should have the same price point as a hard back. A majority seem to think that it should be less than a paper back, even if it's released at the same time as the hard back.

Shouldn't the lack of production overhead (Presses, printing, binding and binding equipment, ect.) be reflected in the price of ebooks? If you want to say the are only a small part of the book cost, fine, but then they're fighting their own propaganda, that claims that hardcovers are expensive because they cost so much to produce. The editing costs (making the book better by changing aspects of the writing, correcting things like grammar and spelling) are one shot, no matter what (or how many) formats the book is produced in.

Whether you release the e-book day and date with the hardcover is strictly the publisher's choice. (However, as Hollywood has found out, you get the most bang for your promotional buck if you release all formats while the publicity is still in the minds of most of you customers.)

[bgalbrecht]

Originally Posted by Ralph Sir Edward

Shouldn't the lack of production overhead (Presses, printing, binding and binding equipment, ect.) be reflected in the price of ebooks? If you want to say the are only a small part of the book cost, fine, but then they're fighting their own propaganda, that claims that hardcovers are expensive because they cost so much to produce. The editing costs (making the book better by changing aspects of the writing, correcting things like grammar and spelling) are one shot, no matter what (or how many) formats the book is produced in.

Whether you release the e-book day and date with the hardcover is strictly the publisher's choice. (However, as Hollywood has found out, you get the most bang for your promotional buck if you release all formats while the publicity is still in the minds of most of your customers.)

This is one of the BPH's biggest problems. They know that the cost to print and ship a hardcover book is something like $2, and for a paperback 50 cents, and the price differential is really so they can recoup all the upfront costs early. The BPH's beef with Amazon was that Amazon was setting an ebook price point for NYT best sellers of $10, instead of 40%-45% off the hardcover list price, a discount common at many brick & mortar retailers. Ultimately, this limits the BPH's ability to raise hardcover prices if they can't force the ebook price to follow suit when they are released simultaneously.

BTW, if you haven't seen it, there's an amusing sequence about Amazon & Bezos this last week in the comic Non Sequitur . All hail Lord Bezos!